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Informist, Tuesday, Sept. 29, 2026

 

By Janwee Prajapati

 

MUMBAI - Government bond prices ended higher, tracking an intraday decline in Brent crude oil futures and US Treasury yields, dealers said. Some traders also covered their short positions, which supported bond prices. However, the gains were capped as traders booked profits at levels considered attractive, dealers said. The state bond auction outcome was better than market expectations. Traders remained cautious ahead of the Reserve Bank of India's Monetary Policy Committee meeting next week, dealers said.

 

The benchmark 10-year bond ended at INR 98.46, up from INR 98.31 Monday. Its yield fell to 7.1628% from 7.1848% at the end of the previous session. The 10-year bond yield retreated from its highest level since April 2024 hit on Monday, which led to traders, likely foreign banks, booking profits, dealers said. Traders largely expect the 10-year benchmark bond yield to rise to 7.25% if it breaks above the psychologically crucial 7.20% mark. The yield on the bond moved in a range of 7.1518% to 7.1864% during the day, despite crude oil easing nearly $4 per barrel and US Treasury yields falling about 5 basis points during the Indian trading session on Tuesday.

 

"Crude and US yields have come down quite a bit, but the market is not reacting to it much," a dealer at a primary dealership said. "The thing is, the market is expecting more OMO announcements before the MPC itself, which is why the market was broadly range-bound today (Tuesday)."  

 

Brent crude oil futures for November delivery were at $104.27 at 1700 IST, down from $106.87 at 0900 IST and from $107.80 per barrel at the end of Indian trading hours Monday. The 10-year US Treasury yield fell to 5.22% towards the end of trading session Tuesday, down from 5.25% at 0900 IST but similar to the level seen at the end of Indian trading hours Monday. The intraday easing in crude oil prices and US yields prompted traders to cover short positions that were placed on expectations of further decline in oil prices, dealers said. However, some traders initiated fresh short bets as they don't see an immediate end to the US-Iran conflict, they said. Traders had expected the Indian 10-year bond yield to close near 7.18% on sustained short bets, but that did not materialise due to the drop in crude oil prices and US yields towards the close of Tuesday's session, dealers said.

   

"There is nothing positive to look for," a dealer at a private sector bank said. "There is no confirmation that Brent will fall because there is no deal (between the US and Iran) in sight. The 10-year bond can go to 7.25% if it breaks 7.20%...it won't see any resistance in between."

 

After the government released its borrowing calendar for the second half of the current financial year, traders expect yields on long-term paper to rise. Some traders expect the spread between the 10-year benchmark and the 15-year benchmark 7.06%, 2041 bond to widen, with the 10-year yield seen rising to 7.35% and the 15-year yield to 7.75% by the end of this calendar year, dealers said. Short-term bond prices are also expected to stay under pressure as traders anticipate the RBI will announce an open market operation to sell bonds to absorb liquidity from the banking system. Such an announcement is expected towards the end of this week, ahead of the RBI's MPC meeting next week, which kept traders cautious, dealers said.

 

However, dealers are divided on the size of the auction, with some expecting OMO sales of INR 1 trillion and others expecting INR 2 trillion. Supply is expected to be concentrated in the five- to seven-year segment, and the seven-year bond is likely to face some pressure due to higher supply, dealers said.

 

Traders also expect the yield on the state bonds with maturity of 10 years and above to rise above 8% post the MPC meeting next week, tracking a rise in central government bonds. At the state bond auction Tuesday, none of the states had a cut-off yield higher than 8%, which was considered a positive cue for the market, dealers said. Moreover, Tamil Nadu refrained from accepting any bids for its 10-year bonds, likely due to the higher than expected cost of borrowing, dealers said. However, the overall result was better than market expectations, dealers said. A total of 12 states raised INR 192 billion at the auction, as against INR 222 billion notified by the Reserve Bank of India.

 

The total turnover in the government securities market was INR 514.50 billion on Tuesday, up from INR 483.25 billion on Monday, data from Clearing Corp. of India showed.      

 

OUTLOOK

On Wednesday, bond prices may take cues from developments in the West Asia war and their impact on crude oil prices and US Treasury yields. Any escalation in the war will significantly impact bond prices, dealers said. Traders are expected to stay on the sidelines ahead of the RBI's Oct. 5-7 meeting, dealers said. Some traders are likely to make space in their portfolios for the fresh supply of gilts at the weekly gilt auction Thursday. Money markets will be shut on Friday on account of Gandhi Jayanti.

 

Traders will also track the release of the August US personal consumption expenditures report and the September jobs report. With yields on long-dated Treasury notes and bonds at levels not seen in two decades, the economic data could determine whether rates rise even further. Any rise in US yields will also affect yields on domestic bonds, dealers said. Traders anticipate the RBI will announce an open market operation to sell bonds to absorb liquidity from the banking system. Such an announcement is expected towards the end of this week, ahead of the RBI's MPC meeting next week, which will likley keep traders cautious, dealers said. Any significant movement in the rupee and swap rates will also lend cues, dealers said. The yield on the 10-year benchmark 6.94%, 2036 bond is expected to move between 7.10% and 7.25%, dealers said.

 

	TUESDAY		MONDAY
	PRICE	YIELD	PRICE	YIELD
6.94%, 2036	98.4600	7.1628%	98.3100	7.1848%
6.48%, 2035	95.5975	7.1506%	95.5800	7.1531%
6.36%, 2031	98.1500	6.8537%	98.0500	6.8805%
7.06%, 2041	97.3700	7.3526%	97.1800	7.3743%
7.24%, 2055	95.0600	7.6663%	94.8000	7.6898%

 

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India Gilts: Remain up; Tamil Nadu rejects bids for 10-year bond at auction

 

	1545 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.44	98.50	98.30	98.39	98.31
YTM (%)	7.1657	7.1576	7.1864	7.1731	7.1848

 

MUMBAI--1545 IST--Government bond prices remained up, tracking an intraday fall in Brent crude oil prices, dealers said. However, some traders booked profits during the day, capping bond price gains, dealers said. Bond prices did not react much to the state bond auction results, though the cut-off yields were largely better than market expectations, dealers said. 

 

A total of 12 states raised INR 192 billion at the auction, as against INR 222 billion notified by the Reserve Bank of India. Tamil Nadu rejected all bids for its 10-year bond at the auction. Market participants called the result "better-than-expected" as none of the cut-off yields was above 8%. An Informist Poll showed cut-off yields above 8% for multiple state bonds. 

 

"The result is positive for the market," a dealer at a primary dealership said. "10-year bids must have been higher so it (Tamil Nadu) did not accept any bids . . . the good thing is that the cut-off yield for none of the states was above 8%."

 

Bond prices also remained supported due to an intraday fall in Brent crude oil prices, dealers said. At 1545 IST, Brent crude oil futures for November delivery were at $105.07 per barrel, down from $106.87 per barrel at 0900 IST. Brent prices had fallen to a low of $104.58 per barrel during the day. However, bond prices did not react much to the movement as traders remained cautious ahead of the RBI's Monetary Policy Committee meeting next week, they said. 

 

Most traders expect the rate-setting panel to raise the repo rate by 25 basis points to 5.50%. Traders covered short positions as they expect yields to soften after the policy decision on Oct. 7. The short-covering in the market near 7.16% yield on the 10-year benchmark 6.94%, 2036 bond supported prices, dealers said. 

 

Total turnover in the government securities market at 1545 IST was INR 361.20 billion, up from INR 358.05 billion at 1530 IST Monday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year benchmark bond is seen moving between 7.14% and 7.19% for the rest of the day.  (Diksha Tripathy)

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India Gilts:Rise more on short covering; gains capped by oil prices, US ylds

 

	1200 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.44	98.50	98.30	98.39	98.31
YTM (%)	7.1661	7.1576	7.1864	7.1731	7.1848

 

NEW DELHI--1200 IST--Government bond prices rose sharply as traders covered short sales after the yield on the benchmark 6.94%, 2036 bond sustained near 7.18%, dealers said. Traders also wanted to reduce the risk on their portfolios heading into the quarter-end Wednesday and ahead of the Reserve Bank of India's Monetary Policy Committee meeting next week. An intraday rise in crude oil prices, however, ate into gains. 

 

Most traders had bet on gilt prices falling over the past week due to rising crude oil prices and US Treasury yields, which intensified Monday after the 10-year yield topped the psychologically crucial 7.15% mark, triggering stop-losses. Purchases from state-owned banks helped the yield stabilise around 7.18% on both Monday and early Tuesday after hitting an over two-year high. This prompted short sellers to book profits, dealers said. Some traders had also feared the RBI would Monday announce more open-market auctions to sell bonds after the government trimmed the share of short-term bonds it would sell in its Oct-Mar borrowing calendar.

 

With the announcement not coming through, traders wanted to cover their short bets on caution around the end of the US-Iran war and before the RBI repo rate decision. Most traders expect the rate-setting panel to raise the repo rate by 25 basis points to 5.50% on Oct. 7. Since this was already priced in, traders lightened their negative bets, which suddenly pushed up gilt prices, dealers said. 

 

"Some people were fearing that OMO (open market operations) sale could be announced Monday, but are now de-risking their portfolios before the policy," a dealer at a private-sector bank said. "My sense is also that, because we are at the month-end now and liquidity is only going to go up from here, so he (the RBI) should announce it (OMO sales) before policy rather than waiting for the MPC day."

 

The sharp rise did not last long as Brent crude oil futures for November delivery rose intraday to above $107.50 per barrel from $106.87 per barrel at 0900 IST. High US Treasury yields also capped gains, with the 10-year yield climbing past 5.25?rly in Indian market hours--a level hit only for the third time since 2002. Traders do not expect the India 10-year gilt's yield to sustain below 7.15% as long as global triggers remain adverse, dealers said. 

 

Trading activity remained subdued ahead of the state bond auction result, which is likely to attract banks' asset-liability managers and long-term investors such as life insurers and pension funds. Spreads of state bonds over gilts at the INR-222-billion auction may inch up from last week due to the uncertainty over the war in West Asia, with traders preferring liquid instruments to capture gains if crude oil prices ease, dealers said.

 

The total turnover in the government securities market at 1200 IST was INR 156.4 billion, down from INR 221.2 billion at 1230 IST Monday, data from Clearing Corp. of India Ltd. showed. The yield on the 10-year benchmark bond is seen between 7.14% and 7.19% for the rest of the day.  (Aaryan Khanna)

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India Gilts: Tad up on PSU bks' buys; Brent crude above $105/bbl caps gains

 

	0935 IST	PRICE HIGH	PRICE LOW	OPEN	PREVIOUS
6.94%, 2036
PRICE (INR)	98.35	98.40	98.30	98.39	98.31
YTM (%)	7.1790	7.1716	7.1864	7.1731	7.1848

 

MUMBAI-–0935 IST--Government bond prices were slightly up as state-owned banks bought bonds when the yield on the 10-year benchmark bond approached 7.18%, dealers said. Gains on bond prices were capped as Brent crude oil futures traded above psychologically crucial level of $105 per barrel, dealers said. An overnight rise in US Treasury yields also weighed on India bond prices Tuesday, dealers added.

 

The trade volume in the market was low Tuesday as most traders refrained from placing aggressive bets amid uncertainty around the end of the US-Iran war, dealers said. The total turnover in the government securities market at 0935 IST was INR 21.10 billion, down from INR 46.15 billion at 0930 IST Monday, data from Clearing Corp. of India Ltd. showed.

 

"Market was expected to open flat only, but it opened slightly higher," a dealer at a state-owned bank said. "Mostly, there is just some buying momentum that is supporting prices. PSUs may be buying at these levels, but throughout the day the market is mostly expected to focus on crude and UST (US Treasury yields) movements."

 

The trading activity remained subdued Tuesday also because market participants await the state bond auction. Tuesday, 12 states will raise INR 222 billion through the sale of bonds at the auction between 1030 IST and 1130 IST. Traders will closely track the auction results, which are likely to lend cues to the market later in the day, dealers said. 

 

Bond prices were pulled down due to an overnight rise in US yields. The yield on the 10-year bond was at 5.26% at 0935 IST, up from 5.22% at the end of Indian gilt market hours Monday. Brent crude oil prices also inched higher Tuesday. Brent crude oil futures for November delivery were at $107.10 per barrel at 0935 IST, similar to $107.79 per barrel at 1700 IST Monday. Traders will closely track developments in the war in West Asia which could impact crude oil prices and US yields and, in turn, Indian bond prices. The yield on the 10-year gilt is seen in a range of 7.10-7.20% during the day, dealers said.  (Diksha Tripathy)

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India Gilts: Seen steady; state bond auction result likely to lend cues

 

MUMBAI – Government bond prices are seen opening steady Tuesday amid uncertainty around the end of the US-Iran war which has kept Brent oil prices above $105 per barrel, dealers said. Traders will closely track developments in the peace talks between the two nations as it could lend direction to global and domestic markets. Traders will likely refrain from placing aggressive bids ahead of the auction of state government securities Tuesday, results of which may lend cues to the market later in the day. 

       

The yield on the 10-year benchmark 6.94%, 2036 bond is expected to open around 7.18% and move between 7.10% and 7.25% during the day, dealers said. Monday, it ended at INR 98.31, or a yield of 7.1848%. Traders said heavy buying could come if the yield on the 10-year benchmark bond crosses 7.20% Tuesday. However, some traders expect that if the yield breaks the 7.20% level, it could go up to 7.25%, which they see as the next technical level. 

 

Bond prices are likely to face pressure from elevated Brent crude oil prices, dealers said. Brent futures for November delivery were at $106.56 per barrel at 0800 IST, down from $107.79 per barrel at the end of Indian gilt market hours Monday. While it has cooled down slightly, prices continue to trade above $105 per barrel. 

 

The effect of a slight ease in Brent crude oil prices may be negated by a rise in US Treasury yields, dealers said. The yield on the 10-year benchmark US Treasury note was 5.24%, up from 5.22% at 1700 IST Monday. Expectations of another rate hike by the US Federal Reserve to tame higher inflation stemming from the war in West Asia have pushed bond yields higher, dealers said. Back home, traders also remain cautious ahead of the Reserve Bank of India's Monetary Policy Committee meeting in October. 

 

Traders will also watch the release of the US personal consumption expenditure report for August and the September jobs report. With yields on long-dated Treasury notes and bonds at levels not seen in two decades, the economic data could determine whether rates rise even further. 

 

Tuesday, traders will also track result of the state bond auction, they said. A total of 12 states will raise INR 222 billion through the sale of bonds at an auction between 1030 IST and 1130 IST. Traders expect the auction to sail through fully. However, cut-off yields may be higher amid elevated yields in the secondary market, they said. A higher-than-expected cut-off yield on bonds may put pressure on bond prices, dealers said.  (Diksha Tripathy)  

End

 

US$1 = INR 95.98

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Avishek Dutta

 

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